<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period from _________________________ to _________________________
Commission file number 0-13217
M/A/R/C INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-1781525
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7850 North Belt Line Road, Irving, Texas 75063
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(Address of Principal Executive Offices) (Zip Code)
(214) 506-3400
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(Registrant's Telephone Number, Including Area Code)
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 3,137,080 shares as of March
31, 1996.
<PAGE> 2
THE M/A/R/C GROUP
INDEX
(UNAUDITED)
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1996, and December 31, 1995 . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Income
Three Months Ended March 31, 1996, and 1995 . . . . . . . . . . . . . . . 2
Consolidated Statement of Changes in Stockholders' Equity
Three Months Ended March 31, 1996 . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996, and 1995 . . . . . . . . . . . . . . . 4
Consolidated Notes to Financial Statements . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . 6-8
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
THE M/A/R/C GROUP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1996 Dec. 31, 1995
-------------- -------------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments $ 965 $ 1,848
Trade accounts receivable, net 10,801 13,292
Expenditures billable to clients, net 5,508 3,204
Notes receivable 12 284
Prepaid expenses and other current assets 3,578 2,565
------- -------
Total Current Assets 20,864 21,193
------- -------
Notes receivable, less current portion 291 82
Property and equipment, less accumulated depreciation of
$14,583,000 and $14,055,000, respectively 27,959 7,377
Investments at cost 10,246 10,049
Intangibles, less accumulated amortization of $2,851,000
and $2,788,000, respectively 617 680
Prepaid pension costs and other assets 5,011 4,823
------- -------
TOTAL ASSETS $64,988 $44,204
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term bank debt $ 1,644 $ 0
Trade accounts payable 1,426 2,530
Advance payments from clients 3,141 2,145
Other accrued liabilities 1,052 1,456
------- -------
Total Current Liabilities 7,263 6,131
Long-term debt, less current portion 19,320 5
Deferred taxes payable and other liabilities 5,375 5,627
------- -------
Total Liabilities 31,958 11,763
------- -------
Stockholders' Equity:
Common stock, $1 par value, 15,000,000 shares authorized,
3,986,081 and 3,783,541 issued, respectively 3,986 3,784
Capital in excess of par value 8,931 6,855
Retained earnings 35,183 34,758
Less treasury stock at cost, 863,030 and 877,059 shares, respectively (7,843) (7,760)
Unearned compensation (3,546) (1,440)
Pension liability (1,822) (1,822)
Unearned ESOP shares (1,859) (1,931)
------- -------
Total Stockholders' Equity 33,030 32,441
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $64,988 $44,204
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE> 4
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996, AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
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(Dollars in Thousands,
Except Per Share Data)
<S> <C> <C>
Revenues $ 19,292 $ 16,510
Costs and expenses 18,315 15,782
---------- ----------
Operating income 977 728
Interest and other income net 169 196
---------- ----------
Income before taxes 1,146 924
Federal and state income tax provision 412 342
---------- ----------
NET INCOME $ 734 $ 582
========== ==========
Net income per share $ .24 $ .21
========== ==========
Weighted average common shares outstanding 3,073,830 2,786,639
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 5
THE M/A/R/C GROUP
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Common Capital in Unearned Cost of
Stock, $1 Excess of Retained Pension Unearned ESOP Treasury
Par Value Par Value Earnings Liability Compensation Shares Stock
--------- ---------- -------- --------- ------------ -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $3,784 $6,855 $34,758 ($1,822) ($1,440) ($1,934) ($7,760)
Exercise options 186 1,003
Purchase treasury stock (83)
Issued restricted stock 210 2,940 (3,150)
Retire restricted stock (194) (1,867) 1,044
Dividends paid (309)
Net income 734
------ ------ ------- ------- ------- ------- -------
Balance at March 31, 1996 $3,986 $8,931 $35,183 ($1,822) ($3,546) ($1,934) ($7,843)
====== ====== ======= ======= ======= ======= =======
</TABLE>
3
<PAGE> 6
THE M/A/R/C GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996, AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------- -------
(Dollars in Thousands)
<S> <C> <C>
Net cash flow from operating activities:
Net income $ 734 $ 582
Noncash items:
Depreciation and amortization 621 647
Net (increase) in receivables and
expenditures billable to clients 187) (107)
Net (increase) decrease in prepaid expenses and other assets (1,432) (640)
Increase (decrease) in trade accounts payable (1,104) (1,138)
Increase (decrease) in accrued liabilities and other liabilities (359) (253)
------- -------
Net cash used by operating activities (1,353) (909)
------- -------
Cash flows from investing activities:
Acquisition of property and equipment (21,138) (835)
Disposition of property and equipment 7 0
Net (additions to) reductions in notes receivabl 63 2
Net (increase in) reduction of investments (198) 34
------- -------
Net cash used by investing activities (21,266) (799)
------- -------
Cash flows from financing activities:
Net (decrease) increase in customer advances 995 (1,231)
Short-term bank borrowing 1,644 0
Acquisition of long-term debt 19,316 2,001
Issuance of common stock 173 1,019
Cash dividends paid (309) 0
Issue/(purchase of) treasury stock (83) (17)
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Net cash provided (used) by financing activities 21,736 (1,772)
------- -------
Net increase (decrease) in cash (883) 64
Cash and short-term investments at December 31 1,848 3,337
------- -------
Cash and short-term investments at March 31 $ 965 $ 3,401
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 7
THE M/A/R/C GROUP
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments necessary to
present fairly the Company's consolidated financial position as of March
31, 1996, the consolidated results of its operations for the three months
ended March 31, 1996, and March 31, 1995, and its consolidated cash flows
for the three months ended March 31, 1996, and March 31, 1995.
2. These condensed consolidated financial statements are presented in
accordance with the requirements of Form 10-Q and consequently do not
include all disclosures normally required by generally accepted accounting
principles or those normally made in the Company's Annual Report on Form
10-K. Accordingly, the financial statements and related notes in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
should be read in conjunction with the accompanying condensed consolidated
financial statements.
5
<PAGE> 8
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The M/A/R/C Group is a marketing information services company, providing
service to over 200 clients nationwide. The majority of our clients are large
public companies. The Company offers a wide range of marketing information
services through its two operating companies: Marketing And Research
Counselors and Targetbase Marketing.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996, WITH THREE MONTHS ENDED
MARCH 31, 1995
Revenues increased to $19,292,000 for the three-month period ended March
31, 1996, compared with revenues of $16,510,000 for the three-month period
ended March 31, 1995. Production and administrative expenses were 94.9% of
revenues, compared with 95.6% for the prior year.
The Company attributed the stronger quarterly financial performance
primarily to increased revenues in both of its core businesses. The business
continued to benefit from increased demand from existing clients and the
addition of new accounts. Revenues derived from the Company's ten largest
clients were 46% higher in the first quarter of 1996 as compared with the same
period last year. In the 1996 first quarter, M/A/R/C had a total of 40
accounts with annualized revenues in excess of $50,000 that did no business
with the Company in the year-ago period.
6
<PAGE> 9
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Operating income increased to $977,000 from $728,000 last year for the
comparable quarter.
Interest and other income decreased $27,000 to $169,000 for the
comparable three-month period.
Net income for the three-month period ended March 31, 1996, increased
$152,000 to $734,000 ($.24 a share) from $582,000 ($.21 a share) for the
comparable three-month period ended March 31, 1995.
The weighted average number of shares outstanding increased to 3,073,830
from 2,786,639 last year. In accordance with Statement of Position 93-6,
"Employers' Accounting for Employee Stock Option Plans," the Company did not
treat as outstanding for calculating earnings per share 244,414 shares held in
the Employee Shareholders Ownership Plan that have not been released to
participants. The Company repurchased 5,097 shares of its stock during the
three-month period ended March 31, 1996.
7
<PAGE> 10
THE M/A/R/C GROUP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
CAPITAL RESOURCES AND LIQUIDITY
The Company purchased its headquarters facility during the quarter for
approximately $20,000,000, financed with a combination of a mortgage and bank
debt. The purchase will have the effect of reducing occupancy costs by an
estimated $100,000 on an annualized basis.
From December 31, 1995, to March 31, 1996, cash and short-term
investments decreased $2,527,000. During the three-month period, $83,000 in
cash was used to repurchase common stock of the Company. The March 31, 1996,
cash and short-term investments position of $965,000n the temporary investment
position of $10,246,000, the working capital position of $13,526,000, and the
existing and unused lines of bank credit totaling $3,000,000 are adequate to
support the Company's cash requirements for operating and capital expenditures.
EFFECT OF INFLATION ON OPERATIONS
Due to a wide diversity in terms of project size, costs and project
duration, the Company is unable to estimate accurately the effects of inflation
on its revenue and profit. The major consequence of inflation is mitigated by
controlling cost estimating procedures in a timely manner where possible.
8
<PAGE> 11
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 18, 1996, subsequent to the close of the first quarter, The M/A/R/C
Group held its annual shareholders' meeting for the fiscal year ended December
31, 1995. The shareholders voted on the following proposal:
A. To elect one director, Elmer L. Taylor, Jr., to hold office for a
three-year term expiring at the 1999 shareholders' meeting or until his
successor is elected and has qualified. Of the 2,487,109 votes
represented by proxy, 2,461,772 voted for Mr. Taylor.
Incumbent directors serving for a three-year term expiring at the
1997 shareholders' meeting are Thomas J. Tierney and Sharon M. Munger.
Incumbent directors serving for a three-year term expiring at the 1998
shareholders' meeting are Cecil B. Phillips, Rolan G. Tucker, and Jack D.
Wolf.
B. No other matters were voted on at the meeting.
9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The M/A/R/C Group
----------------------------------------
(Registrant)
Date: May 15, 1996 /s/ Sharon M. Munger
----------------------- ----------------------------------------
Sharon M. Munger
(President and
Chief Executive Officer)
Date: May 15, 1996 /s/ Harold R. Curtis
----------------------- ----------------------------------------
Harold R. Curtis
(Chief Financial Officer)
10
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 965
<SECURITIES> 10,246
<RECEIVABLES> 10,801
<ALLOWANCES> 0
<INVENTORY> 5,508
<CURRENT-ASSETS> 20,864
<PP&E> 42,542
<DEPRECIATION> (14,583)
<TOTAL-ASSETS> 64,988
<CURRENT-LIABILITIES> 7,263
<BONDS> 19,320
<COMMON> 3,986
0
0
<OTHER-SE> 29,044
<TOTAL-LIABILITY-AND-EQUITY> 64,988
<SALES> 19,292
<TOTAL-REVENUES> 19,292
<CGS> 18,315
<TOTAL-COSTS> 18,315
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (169)
<INCOME-PRETAX> 1,146
<INCOME-TAX> 412
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 734
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
